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A, B and C share profits in the ratio 4:2:4. A retires, and B and C acquire A’s share in the ratio 1:3. What will be the new profit-sharing ratio of B and C?

Answer and explanation

Correct answer: 3:7

A’s old share was 4 out of 10, or 4/10. B and C acquire this share in the ratio 1:3, so B receives 1/10 and C receives 3/10. Therefore, B’s new share is 2/10 + 1/10 = 3/10, while C’s new share is 4/10 + 3/10 = 7/10. Hence, the new ratio is 3:7. Exam tip: divide the retiring partner’s share according to the gaining ratio and add each gain to the partner’s old share.

Related tags

Retirement Of PartnerNew RatioGaining RatioPartnership AccountsProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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